Madagascar: IMF says public investment props up Madagascar's growth

Antananarivo, Madagascar (PANA) - Though the impact of a drought in the central plateau and the cyclone that hit the northeast of Madagascar is not clear, the recent economic performance of the Indian Ocean island nation off the coast of southeast Africa has been encouraging, according to the International Monetary Fund (IMF).

With GDP growth reaching 4.2 percent in 2016, the government aims, in the medium-term, to break Madagascar’s pattern of low growth by scaling up priority spending and accelerating structural reform.

"The macroeconomic outlook in the near term is generally positive, aided by growth in public investment, continued strength in export processing zones, and a recovery in mining," said a statement issued Thursday by an IMF team at the end of a two-week visit to Antananarivo.

During the visit, the team conducted the 2017 Article IV Consultation and held discussions with the authorities on the first review of Madagascar’s economic reform programme supported by the IMF’s three-year Extended Credit Facility (ECF).

"The Fund is continuing discussions with the authorities and development partners to help identify the scale of the damage [caused by the drought and the cyclone] and financing to address urgent needs," said IMF team leader Marshall Mills, also Mission Chief for Madagascar.

According to the team, Madagascar's growth is projected to reach 4.3 percent in 2017, while inflation would remain contained at 7.7 percent. Positive external developments prior to the cyclone enabled the country's central bank to boost reserves significantly, reaching US$ 1.12 billion at end-February 2017.

Drawing on substantial pledges of grants and concessional loans at the donor conference of December 2016, the authorities intend to boost investment and social spending steadily from 2017 to 2019, while maintaining a moderate risk of debt distress.

To ensure the success of the scaling up and to minimize risks, the authorities are enhancing their investment management and monitoring capacity. Revised frameworks to encourage private investment are also under consideration for mining, petroleum, and special economic zones.

According to Mills, the authorities were making progress in strengthening the legal and institutional framework for enhancing governance and fighting corruption.

"The government is committed to submitting draft laws on asset recovery, international cooperation, and combating anti-money laundering to the next parliamentary session. It remains important to follow through with implementation," he said. “Difficulties at state-owned enterprises, especially JIRAMA and Air Madagascar, continue to weigh on the budget and the economy."

IMF staff and the authorities are continuing discussions on recapitalizing Air Madagascar, including obtaining financial assurances, and on restructuring JIRAMA, a state-owned electric utility.
-0- PANA AR 23March2017